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Negotiations heat up on stimulus

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February 11, 2009

Negotiators hoped to seal agreement on President Barack Obama’s economic stimulus package Wednesday after making good progress in the first rounds of closed-door talks.

Obama’s negotiating team insisted on restoring some lost funding for school construction projects as talks began Tuesday in hopes of striking a quick agreement, but by late in the day it appeared resigned to losing up to $40 billion in aid to state governments.

Earlier Tuesday, the Senate sailed to approval of its $838 billion economic stimulus bill, but with only three moderate Republicans signing on and then demanding the bill’s cost go down when the final version emerges from negotiations.

Negotiators were working with a target of about $800 billion for the final bill, lawmakers said.

"That’s in the ballpark," Senate Finance Committee Chairman Max Baucus, D-Mont., said of the $800 billion figure late Tuesday.

Baucus had said earlier that $35.5 billion to provide a $15,000 homebuyer tax credit, approved in the Senate last week, would be cut back. There was also pressure to reduce a Senate-passed tax break for new car buyers, according to Democratic officials.

Within hours of the 61-37 Senate vote, White House Chief of Staff Rahm Emanuel and other top Obama aides met in the Capitol with Democratic leaders as well as moderate senators from both parties whose support looms as crucial for any eventual agreement.

House Democratic leaders promised to fight to restore some of $16 billion for school construction cut by the Senate. Those funds could create more than 100,000 jobs, according to Will Straw, an economist at the liberal Center for American Progress.

House Majority Leader Steny Hoyer, D-Md., acknowledged Wednesday that finding an agreement on differences over tax cuts and aid to states and localities will be difficult.

"We’re going to have to resolve those differences. Simply talking about what we need to do is not going to be very effective if we don’t do it," he said in an interview on the Fox News Channel.

The moderate senators — Olympia Snowe and Susan Collins of Maine and Arlen Specter of Pennsylvania — are demanding that the final House-Senate compromise resemble the Senate measure, which devotes about 42 percent of its $838 billion in debt-financed costs to tax cuts, including Obama’s signature $500 tax credit for 95 percent of workers, with $1,000 going to couples.

The $820 billion House measure is about one-third tax cuts.

Collins said last week she won’t vote for any final bill exceeding $800 billion in spending and tax cuts. Specter warned that the Senate bill must stay "virtually intact."

The GOP moderates also want the final bill to retain a $70 billion Senate plan to patch the alternative minimum tax, or AMT, for one year. The provision would make sure 24 million families won’t get socked with unexpected tax bills during the 2010 filing season.

The AMT was designed 40 years ago to make sure wealthy people pay at least some tax, but it is updated for inflation each year to avoid tax increases averaging $2,300 a year. Fixing the annual problems now allows lawmakers to avoid difficult battles down the road, but economists say the move won’t do much to lift the economy.

House leaders are tempering expectations that they’ll restore many of the cuts.

"You cannot allow the perfect to be the enemy of the effective and of the necessary, and we will not," said House Speaker Nancy Pelosi, D-Calif.

While they’re fighting to preserve cuts to Obama priorities, Specter is fighting to preserve an enormous $10 billion increase for the National Institutes of Health, while Collins obtained $870 million for community health centers in talks last week.

2 Responses to Negotiations heat up on stimulus

  1. DonKrieger

    February 11, 2009 at 4:36 pm

    Stimulate Our Economy Without Government Spending:

    How? Reduce the maximum interest chargeable on credit card debt.

    Reducing this interest rate does not cost our government any money at all. If it is reduced to 12% or less, many times many home owners and others will be able to carry their debt, both credit card and other.

    This measure would enable credit card useage with far less fear.

    This measure would not effect the current balance sheets of the credit card companies, but it would nominally reduce their income going forward on debts at interest higher than the new reduced maximum. But most of those owing that debt are likely “underwater” already and will default now or in the near future. Actually reducing the interest rate may actually moderately increase the income of the credit card companies since more of those “on the edge” will be able to make their payments. For this reason, voluntarily reducing their rates might help the credit card company’s incomes. In any case, this issue must be addressed by experts.

    But overall, reducing the maximum credit card rate to a maximum of 12% or less would significantly stimulate consumer spending without any government spending.

    Don

    Don Krieger
    Pittsburgh, PA
    http://publicservice.evendon.com
    Everything is free and permanent.

  2. AustinRanter

    February 11, 2009 at 7:19 pm

    Interesting idea, Don. When one considers that the current credit rates for way more many people than not are a breathe away from 30%, yep, payments would decrease considerably. But, that’s cutting into the Shadow Bonus Plan for CEO’s of lending institutions.